The iron ore is the dry bulk cargo with the largest trading volume per year, above coal and grains. Iron ore is found in nature in form of rocks, usually mixed with other elements and after it is processed by various industrial processes, it is sold to steel companies. In general, there are not special sub-categories of iron ore as it happens with the coal or grains. Its main categorization is related with its size and quality. In terms of size, we usually meet the “iron ore fines” with a granular size of up to 10mm and the “iron ore lumps” with a size larger than 10mm. In terms of quality, the main parameter is its ferrous content which is expressed as percentage of the total ore and we see iron ore with Fe content which varies from hematite (high grade ore) to ironstone of the lower commercial ranges. A standard grade is the 62% Fe which is also the benchmark of various iron ore indices.
The below table shows the iron ore (in million Metric Tons) transported by sea each year from 2010 to 2015 and its % share in the total dry bulk trade. As we can see, the volume of iron ore trade reaches almost the 30% of the total dry bulk trade and therefore, dry bulk shipping’s dependence from the iron ore is very high.
Export & Import of Iron Ore
In OpenSea we have seen shipments of iron ore in different sizes and various routes around the world. However, by looking the OpenSea map it will be apparent to users that the iron ore market is characterized by high concentration since the exports and imports are respectively controlled by a couple of countries only. Specifically, almost 90% of the world iron ore trade is exchanged between the top 4 importing and 4 exporting countries.
Iron ore is exported both by developing and developed nations. The main exporting countries are Australia (1st position) and Brazil (2nd position) with a share of about 57% and 26% accordingly of the total world exports (as per 2015 data). Both these countries control more than the 80% of the world iron ore exports, which is really impressive. South Africa follows in the third position of the exporting countries while Canada stands in the 4th position, with about 5% and 2.5% accordingly. To a lesser extent, iron ore is also exported out of Sweden and Mauritania. Here, it is also worth to note that Australia has growth its exports during the last five years and this growth is the main reason behind the boost of the total iron ore trade over this period. From about 435 million MT on 2011, the total exports of Australia reached about 775 million MT in 2015 – an increase of about 78%. The growth of Australian iron ore exports is mainly attributed to its short distance from China – which as we will see is the major iron ore importer – giving a higher profit element to the sellers/exporters due to the lower freight involved. Due to this growth, the market share of Australia’s exports increased from about 41.5% in 2011 to about 57.5% in 2015.
The main loading ports are the following:
Australia: Main Australian Iron ore ports are mainly located in West Australia (Dampier, Darwin, Geraldton, Port Hedland) while iron ore is also exported from South Australia (Esperance).
Brazil: Most of the iron ore is exported out of Tubarao, which is also known as one of the largest iron ore ports in the world. Exports are also taking place from ports of Ponta Ubu, Sepetiba Bay and Ponta Da Madeira.
South Africa: The ports of Saldanha Bay is well known for its iron ore exports and this is the main loading port of iron ore in South Africa. Saldanha (for Iron Ore) and Richards Bay (for coal) are the largest ports in South Africa.
Iron ore is loaded at the port of Seven Islands.
Lulea is a major loading port of iron ore.
Iron ore is loaded at the port of Narvik.
Iron ore is loaded at the port of Nouadhibou.
On the other hand, the receiving end of these voyages is almost always one of the industrialized countries. China is, by far, the largest importer of iron ore and with its imports in 2015 to approach the 930 million tons it imports about the 68% of world iron ore. Japan stands in the second position, importing about 130 million tons, which is about 10% of the world iron ore imports. South Korea and Germany follow in the 3rd and 4th position accordingly with a share of about 5% and 3% accordingly.
Loading and Discharge Specifics
In iron ore fixtures, the most important aspect at both the loading and discharge ports is the time.
At most ports of shipment of iron ore, cargoes are loaded at very high speed with capesizes being able to load about 150,000 MT within a day only. The loading rate at the port of Tubarao can be as high as 16,000 MT per hour, which means that a large capesize can fully load in less than a day! Loading usually takes place by a chute fed by conveyors and iron ore is dropped from a great height above the hold. Trimming is not required as the modern bulkers have self-trimming holds while the installations are flexible to distribute the cargo evenly in the cargo holds during loading. For this reason, it is very usual in iron ore fixtures to be agreed between the parties that the cargo should be “spout trimmed”. Due to the very speed loading, it is essential the installation (spout) to be able to move and change trim rapidly and also high ballast capacity pumps are required in order for the vessel not to be delayed for her deballasting operations during loading. Otherwise, in case the vessel cannot deballast as fast as she is loaded it is usual the laytime to stop counting (in case of voyage c/p) or the vessel to be considered off-hire (in case of time charter).
The stowage factor of the iron ore is low and therefore there is not any limitation with the vessel’s capacity. For this reason, we also see that even if the vessel is loaded in her full deadweight, the cargo holds are not loaded in their full capacity but they remain semi-empty. Another loading practice that we sometimes see in the iron ore industry is the so called “Alternate Hold Loading” which is the loading of the Holds 1,3,5,7,9 in full while the other cargo holds remaining empty.
At discharge ports, the cargo is mainly discharged with grabs however the whole system varies from sophisticated equipment in the major ports, up to single cranes in the smallest ports. The method of discharge also depends on the method of inland transportation used but since the speed of turn-around is essential the discharge speed is also very high with the discharge rate to be as high as 40,000 – 50,000 MT per day.
Trade Flow of Iron Ore
Since only a few countries control the total exports and imports, the trade flow is very specific and there are not so many routes as in coal and grain routes. Iron ore from Brazil is exported to China, Japan, South Korea and North Europe in almost all cases with capesize bulkers. One of the major iron ore routes and the most famous one is the Tubarao (Brazil) to Qingdao (China) which is taking place with capesize bulk carriers and its performance does have a high effect on the Capesize Index. Tubarao to Rotterdam is another major route which participates in the Baltic Capesize index.
Iron Ore from Australia is mainly exported to Far Eastern countries, especially China, Japan and South Korea while in a few cases it is exported to North Europe. Capesize bulkers are mainly utilizes also in this case however in this trade we also meet smaller shipments which are carried in handies, supramax or panamax bulkers, however there are not standard routes for those small ships, as happens with the capesizes. The West Australia to Qingdao route is a main route of the Baltic Capesize Index.
Iron Ore out of South Africa is mainly exported to North Europe and China. Capesize bulk carriers are utilized for this trade while in some cases panamax bulkers may also be used. The route from Saldanha Bay to Qingdao is a main route of the Baltic Capesize Index.
The iron ore out of Canada (East Coast) and Sweden is usually delivered to European countries via mainly Panamax and Capesize vessels while iron ore from Nouadhibou is shipped both to North Europe and Far East mainly via Capesize as well as Panamax bulkers.
Apart from the above main trading routes, there are also a few smaller ones, such as the iron ore from Iran (Bandar Abbas port) to China usually in smaller vessels (handysize or supramax and rarely to panamax bulkers) or the iron ore which is exported from India (mainly Mormugao) to Far East with handysize bulkers up to panamax bulk carriers. India used to export larger quantities of iron ore in the previous years, however its activity has become much softer due to export restrictions which had been placed by the Indian government a few years ago, due to environmental issues. Similar export limitations have been in place in Indonesia as well, which used to export iron ore to China a few years ago however its activity has now been decreased to the minimum.
Seasonality and other effects in the iron ore market
The iron ore cargoes are not seasonal and traded all around the year. Its volume mainly depends on the industrial activity of the developing or developed countries and their growth. Furthermore, due to the fact that no main grain cargoes are shipped in capesize bulk carriers, the seasonality of grains does not have a high effect in the capesize sector. However, the capesize industry is dependent and highly influenced by two parameters: The economic conditions in China and the port congestion. Since China is the major importer of iron ore with a massive share, a downturn in its industrial activity will have an even harder effect on the demand for iron ore. Also since there are only few loading ports, it is very usual the port congestion to be increased during the periods of higher demand. An increase in the port congestion may have a positive effect in the freight rates since the available supply is decreased.
Common Charter Parties
In general, the iron ore trade does not require special handling and therefore there are not very special clauses which are used only in this trade. Except of the generic Charter parties, like Gencon, which are usually used, below are the common C/Ps which are dedicated in the iron ore industry.
The most common C/P is the OREVOY (Standard Ore) which was published in 1980 by BIMCO.
Other common Charter parties used in the iron ore sector are the Mediterranean Iron Ore C(ORE)7 as well as the NIPPONORE which was issued in 1973 by The Japan Shipping Exchange Inc.
Very Large Ore Carriers – Valemax
Due to the very large quantities handled in the iron industry and the long distance from the main ports of Brazil to main discharge ports in Far East there was the need for vessels larger than the standard capesize bulkers to be constructed. Vale S.A., who is a leading producer of Iron Ore, in an effort to manage its transportation costs and lower its freight rates, have invested in such large ore carriers which have been called as valemax and utilized in the carriage of iron ore from Brazil to European and Asian ports. With deadweight capacity of up to about 400,000 tons deadweight, the vessels meet the Chinese maximum standard of ship measurements for draft and beam. Valemax are the largest bulkers ever built, in terms of deadweight tonnage or length overall. Valemax can lower the freight rates up to about 25%, which means that if the today’s freight rate for 170,000 MT from Tubarao to Qingdao is about 7.50 per MT, the valemax could be fixed at high $5’s levels.
OpenSea welcomes all iron ore cargoes, as well as carriers, in its platform and can be useful to the iron ore market professionals due to the variety of shipments which can be observed (e.g. from Bandar Abbas, Kuantan, Dammam, Mormugao, Ensenada etc). Also, much more types of ore cargoes were available for transportation in different sizes. Therefore, OpenSea is useful for Shipowners who would like to explore more cargoes and routes, as well as Charterers, who wish to find competitive freight rates and more available tonnage. OpenSea can also be an additional useful tool for Shipbrokers, by helping them to find a matching cargo for the right ship within minutes.